Trump Expected to Drop $10 Billion IRS Lawsuit for $1.7 Billion Compensation Fund

President Trump is expected to drop his $10 billion lawsuit against the Internal Revenue Service in exchange for the creation of a $1.7 billion fund to compensate people who say they were wrongfully targeted by the former Biden administration. Sources familiar with the matter told ABC News the commission overseeing the fund would have authority to distribute the money from the Treasury Department's Judgment Fund to settle claims of governmental weaponization of the legal system.

The fund would cover claims brought by nearly 1,600 individuals charged in connection with the Jan. 6 Capitol attack as well as potentially entities associated with President Trump. The settlement is expected to be finalized in the coming days although sources said the final terms remain subject to change until officially announced.

In addition to the fund, the agreement is expected to include a public apology from the IRS. It would resolve not only the $10 billion suit over the 2019 leak of Trump's tax returns but also $230 million in claims related to the 2022 search of his Mar-a-Lago estate and the Russia investigation from his first term.

The terms would prohibit Trump from receiving payments directly from those claims although entities linked to him could still file separate claims.

The proposed commission would operate with limited oversight. President Trump would have authority to remove its members without cause and the commission would not be required to disclose its procedures or decision-making for awarding the funds. The arrangement has prompted ethical concerns among some administration officials regarding the president suing his own government while gaining control over distribution of more than $1 billion to his allies.

The fund would draw from the Judgment Fund, a permanent appropriation used to pay court judgments and settlements. A spokesperson for President Trump's legal team said the IRS wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization to the New York Times, ProPublica and other left-wing news outlets, which was then illegally released to millions of people.

The spokesperson added that President Trump continues to hold those who wrong America and Americans accountable. The Justice Department declined to comment. The IRS and Treasury Department did not immediately respond to requests for comment.

The settlement would also address a deadline set by the judge overseeing the IRS lawsuit. Last month U.S. District Judge Kathleen Williams questioned whether Trump and the defendants are sufficiently adverse for the case to proceed given that he is the sitting president.

She ordered Trump and the Justice Department to justify by next week why the case should continue. The New York Times first reported that Justice Department officials were considering settling the IRS lawsuit ahead of that deadline.